Use the following table to answer the next question. The money supply and investment are in billions.Money Supply (billions of dollars)Interest RateInvestment (billions of dollars)$507%$100606110705120804130903140Assume that the MPC is 0.8 and the reserve requirement is 0.1. If the Federal Reserve needs to decrease aggregate demand by $100 billion at each price level to move the economy back to full employment and the current interest rate is 5%, then the Federal Reserve should ________ bonds on the open market equal to ________.
A. buy, $4 billion
B. sell, $4 billion
C. sell, $2 billion
D. buy, $2 billion
Answer: C
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Peaks and troughs of the business cycle are known collectively as
A) volatility. B) turning points. C) equilibrium points. D) real business cycle events.
One objection to the notion of Ricardian Equivalence is that ________
A) households will recognize that a tax cut today will only lead to a tax increase in the future B) individuals are short-sighted in their spending decisions C) borrowing constraints have largely been eliminated due to financial innovation in the provisioning of consumer credit D) households typically save most of the monies received from a tax cut
Which of the following is true of a tariff?
a. It is a tax levied by the government on domestic production of goods and services. b. It is a quantitative restriction on imports imposed by the government. c. It is a monetary benefit received by exporters from the government. d. It is a monetary benefit received by importers from the government. e. It is a tax on import and export levied by the government.
Suppose you were a consultant to General Motors and were concerned with the fact that although demand is great today, GM may do poorly in the future because competition from foreign producers is growing and there is no indication it will stop. What would be a wise strategy now for you to address this concern? Advise GM that it should
a. seek a conglomerate merger with some other firm or group of firms b. build larger plant capacity to increase your market share c. create more brands (car models) in order to price discriminate d. cut price to establish brand loyalty e. seek a vertical merger with some other firm or group of firms